Range-Bound Trading Reinforces Downtrend Structure
This is the third week that crude oil has been stuck in a relatively tight range. A lower swing high at $59.00 is part of the downtrend price structure, while the 50-day average has marked dynamic resistance multiple times during the descent. The 50-day average is now at $58.91. Until there is a clear recovery of those levels, the downtrend remains dominant. Essentially, today’s failed effort to breach the two levels further confirms that the sellers remain in charge.
Long-Term Support Holds Within Consolidation
Crude oil has been holding above a key long-term support zone with a current low of $55.00. The prior two weeks provided two bearish weekly candles, each an inverse hammer with a weak closing near the lows of the range. Also, this shows sellers dominating price action within the range. But, since crude is trading inside consolidation, it won’t be clear the next move until a breakout of the $55.00 to $59.00 price range confirms.
Weekly Close May Signal Range Resolution Bias
Keep an eye on this week’s closing price relative to the week’s trading range, as it may provide additional clues. This week has already generated an outside week. If the week ends in the top third of the range that will be a somewhat bullish posture, while a closing in the bottom third, a bearish indication. Each, requiring further confirmation once triggered.
Lower Swing High Raises Risk of Support Failure
Today’s bearish performance establishes a possible slightly lower swing high that was followed by sharp intraday selling. This could be a warning that Monday’s low of $56.38, also a three-week low, is at risk of failure, leading to a deeper pullback closer to the recent trend low. However, the bear trend is clearly dominating price action and pointing to a likely bearish continuation eventually.
Bullish Reversal Requires Decisive Break Above Resistance
Nonetheless, a decisive rally above $59.00 lower swing high would indicate a possible trend change and reversal to the upside. But any breakout would need to see additional signs of demand to confirm the strength of the breakout and the potential for higher targets to be reached.
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